James T. Caillouette: Health-care reform requires careful treading

I care about the practice of medicine. I want, to the best of my ability, to serve people in need of my care.

As a practicing orthopedic surgeon, member of the board of managers of a hospital, former president of the California Orthopedic Association and most importantly, a long time member of the Orange County medical community I have been engaged in discussions concerning health-care reform for years.

The question of how the Accountable Care Act will impact the health care that we provide is burning in my mind. Like most physicians, I care about equity and efficiency concerning health care. They are two sides of the reform coin. While I admit I am not a policy expert, I have some early fears and some early optimism about some of the proposed changes in Medicare and its relationship to the Affordable Care Act or Obamacare.

I am in my twenty-fifth year on staff at Hoag Hospital, and since 2010, the Hoag Orthopedic Institute. Since joining the founding board of managers of the orthopedic hospital, I have learned the facts of how a hospital runs – how much care costs and what is paid for by the various payers, such as Medicare, Medicaid, Blue Cross, Cigna, etc.

The physicians at HOI have committed service to the SOS – El Sol Wellness Center in Santa Ana, among other groups, to expand health choices of low-income households. We have provided charitable surgical care at Hoag and HOI for individuals who could not afford to pay.

What is clear to me as a physician, surgeon and hospital board-member is that in order to sustain our ability to fulfill our mission to care for those who cannot afford to pay for their care entirely, we must be able to secure a positive cash flow and extra dollars at the margin. To continue to provide the highest quality care, for which HOI was recognized by The Center for Medicare and Medicaid Services in 2012, we need top notch nurses, pharmacists and support staff. We need state of the art equipment, and we are required by CMS to have a highly integrated electronic medical-records system. In addition, the state and federal regulatory burden is extremely costly in health care compared to other industries. It likely will be more costly with the implementation of the varied reforms now on the radar screen.

While the differences between the Republican or Democratic proposals for the Affordable Care Act and future Medicare/Medicaid budgets vary, there is a clear need to “bend the cost curve” to create sustainable funding and to reduce the rate of spending growth. Yet, the solutions proposed by both sides for further cuts in reimbursement levels could seriously impact the mission of doctors and hospitals.

As a personal example, between 1992 and 2008, the Medicare reimbursement that I received to perform a total hip or knee replacement was reduced 64% in inflation adjusted dollars. It has been reduced further since 2008. While there has been an increase in overall health-care spending, as this example shows, those providing the care are not the reason.

In California, over 90 percent of hospitals sustain a net loss on the care provided for Medicare patients, and an even greater loss for Medicaid patient care. In this context, expectations are that 30,000,000 new individuals will be covered soon by Medicaid and more by the Affordable Care Act. I applaud this. However, without sustainable and predictable funding to those providing care and the facilities they work in, we will not be able to fulfill our mission. The 25 to 30 percent cost shifting that occurs between commercial insurance (Blue Cross, Cigna, etc.) and Medicare/Medicaid will eventually go away as a result of implementation of the Affordable Care Act. Put another way, the funds that currently prop up the cost of care for the uninsured and underinsured will erode, and doctors as well as hospitals may be forced to opt out in order to remain financially viable.

I fear those not directly involved in providing care will dismiss these statements as self-serving. They are not. I am concerned that we need to move beyond rhetoric to define a health-care system that is efficient, chooses treatments after weighing benefits over costs and provides quality care to all patients, including low-income patients.

The best way to look at reforms is to focus on rewarding the best patient outcome and experience at the lowest cost-a focus on value based care. Government subsidies, to the extent feasible and supportable, should be gradually targeted toward low-income folks. Hospitals and doctors who provide a value based care experience should be rewarded with sustainable, rather than continually shrinking reimbursement. Both President Obama and Congressman Ryan have indicated a willingness to support the payment for health care through a bundled payment (a single payment shared by all who provide care). The payment will make it easier for all those providing care to work together as efficiently and effectively as possible.

We at Hoag Orthopedic Institute have been a part of a statewide pilot program for several years to demonstrate this concept. It works. Let physicians and hospitals align and work together to create ideal solutions for their circumstances. Ideally, through reengineering their health-care processes, hospitals and their physicians will make a fair margin. They then will be able to delegate a portion of that margin towards those who cannot afford care. If the reformed Medicare, Medicaid, health-care exchanges and Affordable Care Act reduce reimbursements without creating opportunities for positive creative change, there will be a dramatic reduction in the ability to provide care for the Orange County community.

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